Flowing orders from US and Europe has shown improvement regarding economies merging out of recession.
Software companies Infosys technologies and Tata consultancy Services are ready to report higher revenues for December as firms like British Petroleum increased its outsourcing but the rupee and higher wages can reduce the profitability.
$60 billion Indian technology sector which depends on the US and europe for revenue has faced tough business conditions for more than a year as their client such as Citigroup and General Electric cut costs as the credit crisis reduced demand. But the situation improved in the last few months with steady flow of order as developed economies emerge out of recession. But the appreciation of Indian rupee against the US dollar would again reduce profitability.
The quarter saw deals like British Petroleum global vendor consolidation contract worth over $2 billion shared among others by TCS and Infosys. Software packages like SAP and Oracle which were onsite heavy are now about 60% offshore. Lot of Indian companies like HCL Technologies have gained from this shift and HCL's buyout of Axon a year earlier helped too.
The revival of business may ensure continued order flows, but may not necessarily lead to rising profitability as the currency movements may be adverse.
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